Recently, with the strong support of Cathay Pacific China Headquarters, Cathay Pacific China Shanghai Branch successfully completed a SOFR currency swap trading business, which is also the first SOFR currency swap trading business of Taiwanese banks in mainland China. The successful implementation of this transaction conforms to the international market interest rate adjustment and trade financing market trends. It is not only an innovation and practice of Cathay China to help enterprises with exchange rate hedging, but also provides guarantee for the further development of mainland Taiwanese enterprises.
LIBOR (interbank lending interest rate) will gradually withdraw from the historical stage. The market generally prefers SOFR (guaranteed overnight financing interest rate) as the benchmark interest rate to replace US dollar LIBOR. SOFR is closer to risk-free interest rate and can truly reflect the market risk-free interest rate situation. Against this background, Cathay China actively responds to customer needs and provides customers with comprehensive financial service solutions based on the new pricing rules in a timely manner. By combining the foreign debt of customers with SOFR as the interest rate calculation conditions, Cathay China promptly completed the preparation of derivative instruments denominated at the new benchmark interest rate, locking the floating interest rate cost of US dollar foreign debt borrowed in Taiwan for customers and paying a fixed interest rate in RMB, while also meeting customers' exchange rate hedging needs.
It is worth mentioning that in the special period of epidemic prevention and control, Cathay Shihua China actively leverages its digital advantages, and all materials required for business are submitted online to minimize the impact of the epidemic on customers. At the same time, a green channel for financial services was opened to implement fee reductions and concessions, and to reduce the exchange rate hedging costs of small and medium-sized enterprises. With the above series of powerful measures and the close cooperation of various departments in the industry, the transaction was successfully implemented and won high recognition and evaluation from customers.
In the future, Cathay China will continue to actively participate in the global new benchmark interest rate conversion process. By innovating various alternative interest rate products, it will promote the smooth operation of the new benchmark interest rate in the market, and further provide effective solutions for the real economy, provide customers with comprehensive functions and competitive services, and also do its best to manage the exchange rate risk of enterprises.
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